Trump vs. Clinton: policy perspectives - Ernst & Young of carried interest and call for business tax reform. Clinton explicitly calls for a tax increase on high incomes; Trump calls

As the presidential race has narrowed to two presumptive nominees — Republican Donald Trump and Democrat Hillary Clinton — there has been a renewed focus on their policy positions on tax, health care, infrastructure and energy, trade, and financial services issues. The plans of each of the candidates remain in flux, as details evolve, others have yet to be revealed, and the candidates pivot to drawing contrasts with each other rather than their primary opponents. As a general matter, the 2016 presidential campaign is widely acknowledged as being unprecedented, with Republican voters attracted to an outsider without Washington experience and with positions that are contrary to the party’s traditions, and the presumptive Democratic nominee pushed further to the left with the influence of Senator Bernie Sanders (I-VT). The unconventional campaign season has resulted in some overlaps in the proposals of Trump and Clinton, in addition to stark contrasts.

Tax (page 2): Both candidates take aim at the current treatment of carried interest and call for business tax reform. Clinton explicitly calls for a tax increase on high incomes; Trump calls for a massive tax cut for everyone.

Health care (page 8): Trump’s health care platform begins with repeal of the Affordable Care Act (ACA), while Clinton supports continuation and improvement of the system under the ACA.

Infrastructure and energy (page 11): In one of the strongest similarities, both candidates seek increased infrastructure investment. On energy, however, Trump supports a renewed reliance on traditional energy sources, while Clinton seeks to eliminate tax incentives for the oil and gas industry and increase reliance on renewable energy.

Trade (page 12): Both candidates take a very skeptical view of current trade policies and the practices of other nations, particularly China.

Financial services (page 14): Trump has not detailed a plan but does support a dismantling of Dodd-Frank. Clinton, in contrast, has outlined a long series of detailed financial reform proposals intended to defend and build upon the law.

Trump vs. Clinton: policy perspectives July 2016

https://www.hillaryclinton.com/briefing/factsheets/2015/10/08/wall-street-work-for-main-street/

Confidential — All Rights Reserved — ©2016 Ernst & Young LLP Trump vs. Clinton: policy perspectives | 2

Tax

With respect to taxes, Trump released a detailed plan in September 2015 and is reportedly preparing to unveil additional details and modifications to reduce projected deficits under the plan. Clinton has not released a comprehensive tax plan: she has described her positions on a piecemeal basis, and her campaign has promised that additional detail is forthcoming.

The tax plans of the two candidates share some similarities but are different in many ways that include structure: Trump’s plan includes an overall tax reform framework with many details left unstated; Clinton’s plan

is not comprehensive and includes detailed proposals only in discrete areas. The clearest distinction to be made between the two positions is in terms of revenue: the Trump plan has been estimated to be a $10t to $12t tax cut, depending on whether macroeconomic effects are taken into account, while Clinton’s position amounts to as much as $1t in tax increases. On a policy basis, the two plans overlap in calling for ordinary income treatment of carried interest, which is currently taxed as capital gains, and in calling for business tax reform, though full details on the latter topic have not been released.

Revenue estimates

Sources: Citizens for Tax Justice (CTJ), Tax Policy Center (TPC) and Tax Foundation (TF) estimates. The three organizations estimate slightly different policies, so are not strictly comparable.

$(10.1)

$0.2

$(12.0)

$0.5

$(9.5)

$1.1

$(12.0)

$0.5

$(15)

$(12)

$(9)

$(6)

$(3)

$0

$3

$6

$9

$12

$15

Rev

enue

gai

n or

loss

Citizens for Tax Justice

Tax Policy Center

Tax Foundation (static)

Tax Foundation (dynamic)

Trillions of dollars, 10 year

Trump

Clinton

Trump Clinton

-$10.1t (TF dynamic score) -$12t (TF static score) -$9.5t (TPC) -$12t (CTJ)

+$191b (TF dynamic score) +$498b (TF static score) +$1.1t (TPC) +$502b (CTJ)


Corporate taxes

Trump Clinton

Top corporate tax rate 15% • No specifics on rates • Call for unspecified business tax

reform to generate $275b/five years toward infrastructure spending

• “Reform our tax code to reward businesses that invest in workers and production here in America, rather than … overseas”

Top pass-through rate 15% (new business income tax rate within the personal income tax code that matches the corporate rate)

Taxation of future foreign earnings

Immediate worldwide taxation, repeal of deferral

Mandatory tax, untaxed accumulated foreign earnings

10%

Inversions Discouraging inversions will grow the economy

• Exit tax • 50% Sec. 7874 test

Offshoring 35% tariff on goods imported into the United States by US companies that have moved overseas

• Claw back tax breaks if corporations ship jobs overseas, use proceeds to invest in America

• Tax incentives to encourage investment in the hardest-hit manufacturing communities

Interest “Reasonable cap” on deductibility of business interest expense

(No stated position)

R&D (No stated position) Use revenue from closing loopholes to help drive growth and job creation, including strengthen R&D

Derivatives (No stated position) Require that derivative contracts be marked to market annually

Other business provisions “Reducing or eliminating corporate loopholes that cater to special interests, as well as deductions made unnecessary or redundant by the new lower tax on corporations”

• Eliminate tax incentives for fossil fuels • End “Bermuda reinsurance loophole” • Tax on high-frequency trading

Individual tax rates 10%, 20%, 25% No rate changes, but: • 4% “fair share” surtax on annual

income over $5m • Buffett Rule minimum 30% rate,

income over $1m • 28% cap on itemized deductions for

high incomes


Individual taxes

Trump Clinton

Capital gains and dividends • 15% for those in 20% bracket • 20% for those in 25% bracket • 3.8% net investment income tax

repealed

• Ordinary income for assets held less than two years (+3.8% net investment income tax)

• Rate reduced 4% each year • 20% for assets held six plus years • Prevent high-income taxpayers from

“misclassifying” income as capital gains

Carried interest Ordinary income Ordinary income

Estate tax Repealed • 2009 regime of $3.5m exemption, 45% rate

• Set lifetime gift tax exemption at $1m

Individual credits (No stated position) Tax credit for caregivers of elderly, disabled relatives

State and local tax deduction (No stated position) Cap all itemized deductions at a tax value of 28%, with exception for charitable contributions Mortgage interest No change

Charitable contributions No change

Other itemized deductions • Deductions pared back as tax rate increases

• “Reducing or eliminating most deductions and loopholes available to the very rich”

“Shut down the ‘private tax system’ for the most fortunate”

Retirement policy (No stated position) Close the “Romney loophole” on IRAs

PEP and Pease “Steepening the curve” of PEP and Pease (No stated position)

Personal AMT Eliminated Retained

Life insurance buildup Included in income for high earners (No stated position)


Trump. Released in September 2015 amid a crowded Republican presidential field, Trump’s tax plan generally follows the formula of a number of Republican tax reform plans in recent years, of lower rates combined with base broadening. He proposes:

• A 15% corporate income tax rate

• A new business income tax rate within the personal income tax code matching the 15% corporate tax rate

• A top individual income tax rate of 25%

There are few mentions of specific tax benefits that would be cut: the plan in a general sense calls for “reducing or eliminating most deductions and loopholes available to the very rich” and “reducing or eliminating corporate loopholes that cater to special interests, as well as deductions made unnecessary or redundant by the new lower tax rate on corporations and business income.” Individual changes specified under the plan include “steepening the curve” of the personal exemption phaseout (PEP) and the Pease limitation on itemized deductions and phasing out the tax exemption on life insurance interest for high-income earners. For businesses, the plan calls for a “reasonable cap” on the deductibility of business interest expenses.

The plan purports to simplify the tax code by taking nearly 50% of current filers off the income tax rolls entirely and reducing the number of tax brackets from seven to four for everyone else. Income taxes would be eliminated for single filers with $25,000 or less in annual income and married filers with $50,000 or less in annual income, a move that the campaign said would remove nearly 75m households — over 50% — from the income tax rolls. Three other rates would be set at 10%, 20% and 25%; the long-term capital gains and dividend rate would be set at 15% for individuals in the 20% income tax bracket and set at 20% for individuals in the 25% income tax bracket. The plan would also eliminate the marriage penalty, alternative minimum tax (AMT) and estate tax. While the plan seeks to curb deductions, charitable giving and mortgage interest deductions will remain unchanged for all taxpayers under the plan.

On the corporate side, Trump’s plan represents a significant departure from other Republican tax reform proposals in calling for an end to deferral of tax on foreign earnings without a switch to a territorial system that would spare such earnings from US tax;

the worldwide tax system would remain in place. “Corporations will no longer be allowed to defer taxes on income earned abroad, but the foreign tax credit will remain in place because no company should face double taxation,” Trump’s plan states.

Consistent with other Republican plans, Trump calls for a one-time deemed repatriation at a 10% tax rate, and campaign documents suggest that revenue from the tax would be allocated toward the corporate rate reduction and that corporations would be required to meet reinvestment standards for repatriated income. Trump’s outline said companies “can bring their cash home and put it to work in America while benefiting from the newly-lowered corporate tax rate that is globally competitive and no longer requires parking cash overseas.” In announcing the plan in 2015, Trump said the reason companies are not currently bringing their income earned abroad is because “The tax is onerous. It doesn’t make sense to bring it back. And in fact, many companies are leaving the United States, they’re leaving our shores to go and collect their money.”

There has been renewed focus on Trump’s tax plan in the wake of his comments that taxes on higher-income individuals may have to be increased, at least above what he initially proposed. On NBC’s Meet the Press May 8, Trump said he would “make sure the middle class gets good … tax breaks” and “fight very hard for business.” Regarding the tax burden for the wealthy, Trump said, “I think, frankly, it’s going to go up — and, you know what, it really should go up.” He also said his plan is really a floor, subject to negotiation with members of Congress. “I don’t think that’s going to be the final plan, because they are going to come to me, including the Democrats and everybody else, they’re going to come to me, they’re going to want to negotiate,” he said. On CNN May 9, Trump clarified that “everybody’s getting a tax cut,” and that taxes on the wealthy may need to be increased from his initial proposal, not where they are currently. Asked by The Wall Street Journal May 10 whether the plan would be changed, Trump said, “I always believe in flexibility and remaining flexible.” He also bemoaned the high corporate tax rate and said of negotiations with Democrats, “It will be give and take and they’re going to want other things having nothing to do with this.”


Clinton. The details released thus far by Clinton do not amount to a tax reform plan per se, and do not directly address statutory individual income tax rates or the corporate tax rate. Instead, the plan works around the edges of the tax system and targets high-income individuals through a surtax, a minimum tax, higher capital gains rates and a return to the 2009 estate tax regime. Clinton has called for business tax reform to provide $275b in infrastructure investment over five years, but the plan does not specifically propose to change the current system of taxing the foreign earnings of US multinational corporations, nor other structural changes to the corporate tax system. President Obama has called for a 14% one-time tax on previously untaxed foreign income to provide $176b (over 10 years) in revenue for infrastructure investment. Clinton’s materials on business tax issues do target certain current benefits, including those for the oil and gas industry, Bermuda reinsurance, and derivatives trading. Clinton has proposed ending the “Bermuda reinsurance loophole” and tax gaming through complex derivative trading. “High-income money managers have used loopholes related to foreign reinsurance — often located in Bermuda — to avoid paying their fair share. And they take advantage of complex derivative trades to lower their tax bill,” according to Clinton campaign materials that said she would build on proposals from President Obama and Republicans in Congress to close down the two “loopholes.” She would also “impose a tax on harmful high-frequency trading and reform rules to make our stock markets fairer, more open, and transparent,” and end tax subsidies for the oil and gas industry. Clinton has proposed a 15% tax credit for companies that share profits with workers, with the $20 billion cost paid for through the closure of tax loopholes that she will identify as part of an agenda to be detailed later. More broadly, she said in June 2015, “[L]et’s agree that hugely successful companies that benefit from everything that America has to offer, should not be able to game the system and avoid paying their fair share, especially while companies who can’t afford high-priced lawyers and lobbyists end up paying more.”

To a large extent, Clinton’s tax plan continues the general themes and many of the specific proposals of the Obama Administration, including income inequality, deterring companies from relocating overseas, and additional taxes

related to financial services. According to her campaign website, “Hillary believes the defining economic challenge of our time is raising incomes for hardworking Americans.” She feels, however, that the tax code is “rigged to favor multi-millionaires and billionaires who can exploit loopholes and shelter income in order to avoid paying their fair share.” Campaign materials say that Clinton supports “ending the ‘carried interest’ loophole, enacting the ‘Buffett Rule’ that ensures no millionaire pays a lower effective tax rate than their secretary, and closing tax loopholes and expenditures that benefit the wealthiest taxpayers to pay for her plan to make college affordable and refinance student debt.” She has proposed a 4% “fair share” surtax on those earning more than $5m per year as a way to ensure that effective rates rise for taxpayers “who are avoiding paying their fair share, and that the richest Americans pay an effective rate higher than middle-class families.”

Specific Obama Administration tax proposals that Clinton continues to push for include:

• Treating carried interest as ordinary income

• The Buffett Rule, proposed by President Obama since 2011 and by Democratic senators, requiring those making more than $1m per year to pay an effective tax rate of at least 30%

• A 28% cap on itemized deductions, with the exception for charitable contributions, for taxpayers over certain income thresholds (Clinton has pledged to not raise taxes on families earnings $250,000 or less)

The 28% cap would presumably be part of Clinton’s New College Compact for making college affordable and addressing student debt, which is to be paid for by limiting certain expenditures for high-income taxpayers.

Under Clinton’s proposals, capital gains from investments held for less than two years would be taxed as ordinary income, or as high as 39.6% under the current system, plus the 3.8% net investment income tax on higher earners. The rate would be reduced by 4% for each year held, such that investments held for at least six years would be taxed at a 20% rate; the 3.8% net investment income tax on higher earners would continue to apply. Like President Obama, Clinton has proposed restoring the estate tax regime to 2009 parameters of a $3.5m exemption and 45% rate.


Hillary Clinton proposed top capital gains rates

Holding period Clinton top rate Current top rate

Less than 1 year 43.4% 43.4%

1—2 years 43.4% 23.8%

2—3 years 39.8% 23.8%

3—4 years 35.8% 23.8%

4—5 years 31.8% 23.8%

5—6 years 27.8% 23.8%

6+ years 23.8% 23.8%

Donald Trump proposed tax rates

Income tax rate Long-term capital gains/ dividends rate

Single filers Married filers Heads of household

0% 0% $0 to $25,000 $0 to $50,000 $0 to $37,500

10% 0% $25,001 to $50,000

$50,001 to $100,000

$37,501 to $75,000

20% 15% $50,001 to $150,000

$100,001 to $300,000

$75,001 to $225,000

25% 20% $150,001 and up $300,001 and up $225,001 and up


Health care

Like Republicans in Congress, Trump believes that positive reforms of the health care system must begin with repeal of the Affordable Care Act (ACA), including the individual mandate. He promises to work with Congress “to make sure we have a series of reforms ready for implementation that follow free market principles and that will restore economic freedom and certainty to everyone in this country.” One of the proposals in the policy paper on Trump’s website includes extending deductibility of health care premiums, currently afforded to employer-provided coverage, to individuals. “Businesses are allowed to take these deductions, so why wouldn’t Congress allow individuals the same exemptions?” he asked. Trump has also said no one should slip through the cracks of the health care system simply because they cannot afford insurance: basic options for Medicaid must be reviewed, and should help ensure that those who want health care coverage can have it. Trump also called for the removal of barriers to entry into free markets for drug providers.

Clinton has focused her concern on rising drug prices. She would retain the ACA and build on it to slow the growth of out-of-pocket costs. To reduce the cost of purchasing health insurance on the ACA exchanges, her plan would provide enhanced relief and a tax credit of up to $5,000 per family to offset a portion of out-of-pocket exposure and premium costs above 5% of their income. She would enhance the premium tax credits now available through the exchanges so that those now eligible will pay less of a percentage of their income than under current law and ensure that all families purchasing on the exchange will not spend more than 8.5% of their income for premiums. More generally, Clinton also calls for lowering drug costs for working families and seniors as well as transforming the health care system “to reward value and quality.”

Also, in early May, Clinton said she is in favor of allowing individuals to buy in to Medicare at a certain age. The idea was proposed by President Bill Clinton in 1998 and has been mentioned by Hillary Clinton in previous campaigns, for senator and president.

Trump Clinton

Medicare • Voiced support for allowing Medicare to negotiate drug and biologic prices

• Allow Medicare to negotiate drug and biologic prices

• Extend Medicaid drug rebates to Part D LIS beneficiaries

• Allow individuals to buy in to Medicare at a certain age

• Supports Medicaid expansion as part of ACA

Medicaid • Block grants Medicaid to the states • Supportive of increased federal match rates (100% match for the first three years) in order to encourage all states to expand Medicaid

Affordable Care Act (ACA)

• Repeal and replace the ACA • Supportive of the law, wants to enhance affordability

• Repeal the “Cadillac” tax


Trump Clinton

Affordability • Require price transparency from health care providers

• Allow for the sale of health insurance across state lines

• Allow for tax-deductible health insurance premiums

• Expand use of health savings accounts

• Create a tax credit up to $2,500 for individuals and $5,000 for families to help pay high out-of-pocket medical costs

• Require insurers pay for at least three doctors’ visits

• Prohibit providers from charging out-of-networks rates when a patient visits a facility covered by their insurance plan

Prescription drug pricing

• Allow reimportation of drugs from overseas • Expressed opposition to Turing

Pharmaceuticals’ pricing practices

• Cap monthly ($250) and annual out-of-pocket costs for prescriptions drugs (only applies to prescription drugs covered by insurance)

• Lower biologic exclusivity period from 12 to 7 years

• Allow reimportation of drugs from countries with “safety standards as strong as those in America”

• Use the results of private sector comparative effectiveness research (CER) analyses to “hold drug companies accountable for … their costs”

• Prohibit “pay-for-delay” deals

Other • In 2000, was supportive of universal health care

• Increase enforcement of antitrust laws in regards to industry consolidation

• Allow all immigrants to buy ACA marketplace coverage


Infrastructure and energy

Both candidates have called for investment in infrastructure; for Clinton, at least, this is seen as a priority she would act on early. Donald Trump has not put forth a specific plan, but has called the current state of US infrastructure a “disaster” and said he has the will and know-how to invest wisely and make improvements. “I am an infrastructure person. I know about infrastructure like nobody that has ever run for office in the history of the presidency,” Trump said May 5 on CNBC. “Maybe my greatest strength is the economy, jobs, and building …”

In November, Clinton proposed an increase in federal infrastructure funding by $275b over a five-year period, fully paid through business tax reform. Of these funds, she would allocate $250b to direct public investment and the remaining $25b to a national infrastructure bank to support loans, loan guarantees and other forms of credit enhancement, an idea that has been previously proposed by Democrats in Congress.

With regard to energy, during his campaign, Trump has often dismissed various Obama administration energy, environmental and climate policies as “disgraceful.” He has said that global warming is a “hoax.” Trump sought to further distinguish himself by committing to “bringing back” the coal mining and steel manufacturing industries. He also strongly supported fracking for natural gas during campaign stops in Pennsylvania and other primary states.

On May 26, Trump summarized his “America first” pro-resource development and anti-federal regulation energy agenda at the Williston Basin Petroleum Conference in North Dakota.

Trump vowed in his remarks to repeal the EPA’s Clean Power Plan and “cancel” the Paris climate agreement. He pledged to revoke the “waters of the US” regulations that affect wetlands, lift moratoriums on energy development on public lands, and “remove obstacles” to domestic oil and gas development. Instead, his administration would focus on “real environmental problems,” such as clean water.

Consistent with his general outlook on issues, Trump’s focus regarding fossil fuel development is US-centric; his support for the Keystone XL Pipeline and imports of Canadian oil is conditioned on a “different deal” requiring

that the United States should “be given a significant piece of the [Keystone] profits.” He reiterated previously expressed hostility to OPEC, stating in his conference remarks that the US under his administration will domestically produce enough energy that it will be independent and “we don’t deal with them.”

Trump expressed conditional support for renewable energy, stating that renewables should not be favored “to the exclusion of other forms of energy.” Trump previously opposed offshore wind power development in Scotland, which was near a golf course that he owned. Prior to the Iowa caucus, Trump opposed repealing or phasing out statutory Renewable Fuel Standard (RFS) mandates for biofuels, taking a position at odds with oil producers and refiners. However, in his more recent comments at the petroleum industry conference in North Dakota, he said “we’re going to look at” possible modifications of the RFS.

Clinton generally supports a continuation of the Obama Administration’s policies regarding clean energy, climate change and public land management. While the unexpectedly robust primary challenge from Senator Bernie Sanders has caused her to move left on certain issues (e.g., opposing the Keystone XL Pipeline), she has stopped short of mirroring his views on other matters (e.g., she has not endorsed a carbon tax).

During her eight years of service in the Senate, Clinton’s voting record on energy and environmental issues received an 82% “lifetime” score from the League of Conservation Voters (LCV). LCV endorsed Clinton for president in November 2015, earning the ire of Sanders supporters who argued that the senator’s positions were more deserving of green group support, citing his 95% “lifetime” LCV rating.

Influential Clinton advisors on energy, environment and climate issues include presidential campaign Chairman John Podesta, who served as Chief of Staff to former President Bill Clinton, and Carol Browner, who was Clinton’s EPA Administrator. Podesta and Browner also did stints as senior policy advisors to President Obama.

Consistent with key policy themes during the Obama Administration, Clinton has prioritized climate change and proposes to “make America the world’s clean energy


superpower” by promoting renewable energy production and energy efficiency and reducing oil consumption. Clinton supports the EPA’s Clean Power Plan to reduce electric power emissions and has endorsed the 2015 Paris climate change agreement to further reduce carbon emissions. Her policy positions include a $60b “Clean Energy Challenge” to partner with states and localities to go beyond federal mandates to cut carbon pollution and expand clean energy.

Clinton proposes to “reform,” but not ban, oil and gas leasing on public lands. She also seeks to “end wasteful subsides for oil and gas companies” in order to make clean energy investments. Her observation that “we’re going to put a lot of coal miners and coal companies out of business” has generated controversy in coal-producing regions; however, the broader context of her remarks includes a $30b plan to revitalize coal communities.


Trade

In addition to infrastructure investment, an aggressive trade posture that seeks reform of current US policies and confrontation of the trade practices of other nations, particularly China, is another similarity between Trump and Clinton. The populist tone of the election has bred a skepticism of free trade by both candidates, responsive to views in many American communities that trade has sent jobs overseas and gutted local economies.

Trump has come out strongly against existing US trade policies. Trump has declared his opposition to the pending Trans-Pacific Partnership (TPP) trade agreement, calling it a “bad deal” that will “send jobs overseas” and increase the US trade deficit; criticized the agreement for failing to include measures to prevent currency manipulation; and pledged to renegotiate the North American Free Trade Agreement (NAFTA) (in conjunction with building a wall on the US-Mexico border and seeking to have Mexico pay for the wall). Most of Trump’s expressed views on trade relate to China. He has sharply criticized current US trade policy with respect to China, accusing China of taking advantage of the United States. If elected, he pledges to immediately brand China a currency manipulator and institute a 45% tariff on Chinese imports. In an attempt to deter companies from moving offshore, Trump has also proposed a 35% tariff on goods imported into the United States by US companies that have moved overseas.

The following are the seven steps Trump pledged in a June 28 speech: 1) Withdraw the United States from the TPP 2) Appoint “the toughest and smartest, and I know them

all, trade negotiators to fight on behalf of American workers”

3) Direct the Secretary of Commerce to identify violations of trade agreements and “use every tool” to end these abuses.

4) Tell our NAFTA partners that “I intend to immediately renegotiate the terms of that agreement to get a better deal by a lot”

5) Instruct Treasury to label China a currency manipulator

6) Instruct the U.S. trade representative to bring trade cases against China

7) Use every lawful presidential power to remedy trade disputes with China

Clinton has criticized the current version of TPP and vowed, on her campaign website, to crack down on trade violations to “level the playing field for American workers.” Opposition to TPP was specifically attributed to its treatment of currency manipulation and “weak rules” of origin standard for what counts as a car that can get treaty benefits. She has headed off speculation that she would support the current agreement in a lame-duck session of Congress or later. “I oppose the TPP agreement — and that means before and after the election,” Clinton said. Many political analysts predict that, if she were elected, Clinton would ultimately support moving forward on TPP with some changes, along with the proposed US-EU free trade agreement, consistent with the generally trade-friendly policies of the Obama and Bill Clinton Administrations. Some of those policies need to be revisited, Clinton has acknowledged, including renegotiating NAFTA.

In kicking off her economic vision for the campaign in June 2015, she acknowledged the shifting perception of free trade, saying:

Like Trump, Clinton has particularly taken aim at China, saying in April 2016 that she will:

• Appoint a new trade prosecutor that reports directly to the president and triple the number of trade enforcement officers

• Take on foreign countries that keep their goods artificially cheap by manipulating their currencies

• Establish new remedies to respond, such as duties, tariffs or other measures

“Trade has been a major driver of the economy over recent decades, but it has also contributed to hollowing out our manufacturing base and many hard-working communities. So we do need to set a high bar for trade agreements. We should support them if they create jobs, raise wages and advance our national security. And we should be prepared to walk away if they don’t. To create fair growth, we need to create opportunity for more Americans.”


Trade

Trump Clinton

Overview Has come out strongly against existing US trade policies and the practices of other nations

Vows to crack down on trade violations to “level the playing field for American workers”

Trans-Pacific Partnership (TPP)

Opposed: “bad deal” that will “send jobs overseas” and increase the US trade deficit

Opposed, including in a lame-duck session of Congress: “I oppose the TPP agreement — and that means before and after the election.”

NAFTA Opposes. “If you look at NAFTA and you take a look at what’s been done and how hard Clinton pushed it and that bill has been an absolute disaster.”

Wants to renegotiate terms of NAFTA. “This agreement was negotiated 25 years ago, and a lot of things have changed since then. I would strengthen NAFTA’s labor and environmental provisions.”

China • Wants to brand China a currency manipulator and institute a 45% tariff on Chinese imports

• Force China to uphold intellectual property laws

Wants to stand up to Chinese abuses: “I think that it’s clear that China has not competed fairly in the global marketplace, and there has to be a stricter, more effective approach toward dealing with China.”

Tariffs, other measures 35% tariff on goods imported into the country by former US companies that have moved overseas

“Level the global playing field for American workers and manufacturers by aggressively combating trade violations.”


Financial services

Trump’s position on financial services issues so far has been limited to a handful of broad statements and answers to interview questions, though his campaign has promised a more fulsome policy platform in the coming weeks. In an interview with Reuters on May 17, Trump said he supports “close to a dismantling” of the Dodd-Frank Act, the comprehensive post-crisis financial reform law that was passed almost entirely with Democratic votes in 2010 and has been bitterly opposed by most Republicans. “Dodd-Frank is a very negative force, which has developed a very bad name,” Trump said. “Dodd-Frank has made it impossible for bankers to function. It makes it very hard for bankers to loan money for people to create jobs, for people with businesses to create jobs. And that has to stop.” In mid-May, Trump’s campaign said he planned to release a detailed Dodd-Frank repeal proposal “in two weeks,” but so far none has emerged.

In an earlier interview with Time magazine, Trump said there “are aspects of” Dodd-Frank “you could leave,” though he didn’t specify which. When asked specifically about the Volcker Rule, an element of Dodd-Frank that bans banks from proprietary trading with taxpayer-insured deposits, Trump praised the former Fed chairman for whom the rule was named, Paul Volcker. “Well, I’m not sure if he likes [the rule], but … if he’s happy, I’m happy,” Trump said. “He was a terrific guy. I’ve met him a few times. And I thought he was terrific.” Such a position would place Trump at odds with most Republicans, who have sharply criticized the Volcker Rule and called for a number of exceptions among the asset classes it covers.

Trump has often taken a populist position against Wall Street, spending much of the Republican primary attacking his opponents for maintaining ties to big banks and investment companies, while pointing out that his own campaign was self-funded. He has been critical of the carried-interest tax break for investment managers, saying on CBS’ “Face the Nation” in August 2015, “The hedge fund guys are getting away with murder. They’re making a tremendous amount of money. They have to pay taxes … They’re paying nothing and it’s ridiculous. I want to save the middle class. The hedge fund guys didn’t

build this country. These are guys that shift paper around and they get lucky.”

On the issue of executive compensation — an area where Dodd-Frank required the SEC to issue a series of still-unfinished rules – Trump also took a populist position, saying it was a “joke” and a “disgrace” that CEOs have been able to negotiate generous pay packages with boards that lack the necessary independence to protect shareholders’ interests. Trump has said CEOs are overpaid because they install friends on the board who then give executives “whatever they want, because the friends love sitting on the boards.” He said on CBS’ Face the Nation in September 2015, “It’s disgraceful… Sometimes the boards rule, but I would probably say it’s less than 10%, and you see these guys making enormous amounts of money.”

Trump has broadly criticized the Federal Reserve, saying the central bank has kept interest rates low to satisfy the political desires of the Obama administration. But while Trump has said he eventually wants to replace current Chairman Janet Yellen with a Republican, “I’m not a person that thinks Janet Yellen is doing a bad job. I happen to be a low-interest rate person unless inflation rears its ugly head, which can happen at some point … [that] doesn’t seem like it’s happening any time soon.” Trump has also supported calls by some congressional Republicans to have the Government Accountability Office conduct a comprehensive audit of the Fed.

House Republicans have expressed hope that Trump will support a package of GOP policies rolled out in June dubbed “A Better Way,” which includes a comprehensive plan by Financial Services Chairman Jeb Hensarling (R-TX) to repeal large parts of Dodd-Frank and replace them with alternative approaches. On June 14, House Speaker Paul Ryan (R-WI) said he believed Trump shared their goals, saying, “We feel very confident that our presumptive nominee is comfortable with this agenda.” Hensarling himself met with Trump in New York on the same day that Hensarling gave a key speech unveiling his plan. Afterward, he told the Fox Business network that Trump also wants to “repeal and replace” Dodd-Frank and that he “well received the message.”


Hensarling Plan. Should Trump decide to get behind Hensarling’s plan, he could point to a series of proposals that were laid out in a “discussion draft” in June. Hensarling’s plan would offer banks the option of raising their “leverage ratio” – the proportion of capital held against total assets – to 10%, severely limiting what they could borrow, in exchange for being freed from the Dodd-Frank regulatory regime. That change that would likely require big banks to raise what Hensarling called “several hundred billion dollars in new equity.” The bill also would repeal Dodd-Frank’s “Orderly Liquidation” regime for large, failing financial institutions, replacing it with a new subchapter of the bankruptcy code specifically for financial firms. The Consumer Financial Protection Bureau (CFPB) would be shifted to a five-member commission like the SEC and subjected to congressional appropriations, and the Financial Stability Oversight Council (FSOC), an uber-council of regulators created by Dodd-Frank, would no longer have the power to designate non-banks as systemically important “SIFIs,” subjecting them to more strict supervision.

Among many other provisions, Hensarling’s plan also would require all new financial regulations to pass a rigorous new cost-benefit test; impose higher penalties for financial fraud; and repeal Dodd-Frank’s “Durbin Amendment” capping the interchange fees that banks charge retailers for debit-card transactions.

Clinton. The presumptive Democratic nominee has taken a different approach, outlining a long series of detailed financial reform proposals intended to defend and build upon Dodd-Frank. Clinton said she would veto any legislation that aims to weaken the 2010 law, noting that congressional Republicans have repeatedly tried to impose new restrictions on how the FSOC operates and how it designates certain large non-banks as “SIFIs,” have sought to restructure the CFPB and used the appropriations process to freeze or cut the budgets of key financial regulators.

Clinton has called for imposing a new annual “risk fee” on the largest financial institutions, based on their total liabilities, which would scale higher for firms that have more debt or riskier, short-term forms of debt. Clinton would also call upon regulators to impose higher capital requirements on banks “if she determines that such a step is a necessary complement to the fee.” She would also seek legislation enhancing regulators’ authority

under Dodd-Frank to ensure that the largest financial firms can be “managed effectively,” with “appropriate accountability.” If they cannot demonstrate that, then regulators would be authorized to require that such companies “reorganize, downsize, or break apart.”

Focus on ‘Shadow Banking.’ Clinton has also endorsed several ideas designed to strengthen oversight of “shadow banking” firms such as hedge funds, investment banks and other non-bank financial firms. She would impose new margin and collateral requirements on repurchase (repo) agreements and other short-term securities financing transactions, “in order to limit the buildup of excessive leverage,” and would enhance public disclosure rules for repo agreements, while strengthening leverage and liquidity requirements for broker-dealers. Clinton’s campaign says she would improve upon Dodd-Frank’s new “Form PF” reporting rules for private funds like hedge funds and private equity firms; review recent reforms to money market mutual funds to ensure those changes are adequately addressing risks from such funds; and enhance transparency and disclosure requirements for exchange-traded products.

In the controversial area of high-speed trading, Clinton would impose a high-frequency trading tax aimed particularly at “strategies involving excessive levels of order cancellations.” She would also call upon the SEC to pursue reforms to stock market rules designed to expand access to market data, bring more transparency to “dark pool” trading venues and limit conflicts of interest.

Incentive compensation and risky trading. Clinton’s plan would enforce Dodd-Frank incentive compensation rules to require that a large bank’s senior executives and “material risk-takers” defer a portion of their annual compensation to future years, with a clawback if the bank suffers major losses, and expand such rules to systemically important non-banks. Clinton would also close a “loophole” in Dodd-Frank’s Volcker Rule that allows banks to invest up to 3% of their capital in hedge funds, and reinstate the “swaps push-out” rule for banks’ derivatives trading desks, which was repealed under an agreement with the White House in 2014. Clinton has also offered several proposals to bolster the financial system’s defenses against cyber-attacks.

Heightened enforcement. Clinton’s plan calls for a number of new enforcement and penalty measures for

https://www.hillaryclinton.com/briefing/factsheets/2015/10/08/wall-street-work-for-main-street/


individuals and corporations that break the law. She would emphasize “individual accountability” by prosecuting corporate officers and supervisors when they knew about misconduct by their subordinates but failed to prevent or stop it.

Large financial institutions would have to pay a portion of major civil or criminal fines from the incentive pay of culpable employees, their supervisors, and the relevant senior executives of the firm, and Clinton would “empower regulators to require that senior executives leave their jobs when particularly egregious misconduct takes place under their supervision.”

Clinton also proposes expanding the FDIC Act to ensure that serious crimes under securities, commodities, consumer and banking laws would result in employment bars for individuals across the entire financial services industry.

She would seek to extend the statute of limitations for major financial frauds from five or six years to 10 years,

and would address a recent court ruling by clarifying (through legislation) that insider trading prosecutions do not require knowledge that the source disclosed the inside information for personal benefit.

Finally, Clinton’s plan includes a series of proposals to strengthen punishments for corporations that break the law. She would: 1) curtail the use of deferred prosecution and non-prosecution agreements (DPAs and NPAs); 2) require “detailed and accessible” public disclosure of such agreements and ensure that they impose fines that are “significant enough to deter illegal activity;” 3) require that firms “admit wrongdoing and the underlying facts” as a condition of settlement agreements; and 4) restrict the use of SEC waivers that allow firms guilty of “repeated egregious conduct” to continue issuing stocks and bonds using streamlined registrations.

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Trump vs. Clinton: policy perspectives - Ernst & Young of carried interest and call for business tax reform. Clinton explicitly calls for a tax increase on high incomes; Trump calls